You have recently discovered that a local business has been designated 501(c)(3). Which of the following must be true?(1 point)

Question

Responses

The business has federal tax exemptions.
The business has federal tax exemptions.

The business is a private foundation.
The business is a private foundation.

The business is a public charity.
The business is a public charity.

The business does not earn profits.

Answer 1

The correct response is:

The business has federal tax exemptions.

A 501(c)(3) designation indicates that the organization is recognized by the Internal Revenue Service (IRS) as a tax-exempt nonprofit entity, which means it does have federal tax exemptions. The other statements may not necessarily be true; for instance, not all 501(c)(3) organizations are public charities or private foundations, and they can earn profits as long as those profits are used for the organization's exempt purposes.